Employment Agreement - XM Satellite Radio Holdings Inc., XM Satellite Radio Inc. and Hugh Panero
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EMPLOYMENT AGREEMENT
BETWEEN
XM SATELLITE RADIO HOLDINGS INC. AND
XM SATELLITE RADIO INC.
AND
HUGH PANERO
DATED AS OF JUNE 1, 2001
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THIS AGREEMENT is entered into as of June 1, 2001 (the "Effective
Date"), by and between XM Satellite Radio Holdings Inc., a Delaware corporation,
and its subsidiary XM Satellite Radio Inc., a Delaware corporation, both having
a place of business at 1500 Eckington Place, N.E., Washington, D.C. 20002
(hereinafter collectively referred to as "XM") and Hugh Panero ("EMPLOYEE") a
resident of the State of Maryland.
WHEREAS, XM is engaged in the development, implementation and operation
of a digital audio satellite service to portable receivers; and
WHEREAS, XM is interested in employing EMPLOYEE as its Chief Executive
Officer and EMPLOYEE is interested in being employed in that position subject to
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements of the parties contained herein, the parties
hereby agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the terms defined in this Article 1
shall have the respective meanings set forth below:
1.1. "Affiliate" shall mean any corporation, partnership or other
entity (i) owning more than ten percent (10%) of the then outstanding voting
shares of XM; or (ii) controlling, controlled by, or under common control with
XM. For purposes of this definition, "control" (including the terms
"controlling" and "controlled") means the power to direct or cause the direction
of the management and policies of an entity, whether through the ownership of
securities, by contract, or otherwise.
1.2. "Confidential information" shall mean all information relating to
the business of XM known to XM or learned by EMPLOYEE during the term of
employment and not generally known, including any and all general and specific
knowledge, experience, information and data, technical or non-technical, and
whether or not patentable, including, without limitation processes, skills,
information, know-how, trade secrets, data, designs, formulae, algorithms,
specifications, samples, methods, techniques, compilations, computer programs,
devices, concepts, inventions, developments, discoveries, improvements, and
commercial or financial information, in any form, including without limitation,
oral, written, graphic, demonstrative, machine recognizable, specimen or sample
form.
1.3. "Conflicting Product or Service" shall mean any product or service
of any person or organization other than XM, in existence or under development,
which resembles or competes with a product or service of XM.
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1.4. "Conflicting Organization" shall mean any person or organization
engaged in, or about to become engaged in, research on or development,
production, marketing, or selling of a "Conflicting Product or Service."
1.5. "Inventions" shall mean inventions, designs, discoveries,
developments, creations, and improvements created, discovered, developed,
conceived or reduced to practice.
1.6. "Works of Authorship" shall mean all computer software programs or
other writings, including, without limitation, verbal works, designs, models,
drawings, or audio, visual or audiovisual recordings.
ARTICLE 2
TERM OF AGREEMENT; EMPLOYMENT
2.1. TERM. Subject to the provisions of Article 4 hereof, this
Agreement shall be in effect for a term of three (3) years commencing as of the
Effective Date. For the term of this Agreement, each twelve (12) month period
beginning on the Effective Date or any anniversary thereof shall be considered a
"Contract Year."
2.2. EMPLOYMENT. XM agrees to employ EMPLOYEE as Chief Executive
Officer and EMPLOYEE agrees to accept such employment by XM, on the terms and
conditions set forth herein. EMPLOYEE represents and warrants that neither the
execution and delivery nor performance by him of this Agreement will violate any
agreement, order, judgment or decree to which he is a party or by which he is
bound.
2.3. DUTIES.
(a) As Chief Executive Officer of XM, EMPLOYEE shall have duties and
responsibilities related to building the organization and business, including
but not limited to, achieving agreed revenue, cost, profit and cash-flow
targets, and shall report to the Board of Directors and the Board Chairman.
While acting as CEO, EMPLOYEE shall also serve as a director of XM.
(b) EMPLOYEE's employment with XM shall be full-time and exclusive.
During the term of employment, EMPLOYEE shall devote the whole of EMPLOYEE's
business time, attention, skill, and ability to the faithful and diligent
fulfillment of EMPLOYEE's duties hereunder. EMPLOYEE acknowledges and agrees
that EMPLOYEE may be required, without additional compensation, to perform
services for any Affiliates, and to accept such office or position with any
Affiliate as the Board may require, including, but not limited to, service as an
officer or director of XM or any Affiliate, provided however, that such
services, and such office or position, shall be consistent with EMPLOYEE's
position as Chief Executive Officer of XM. EMPLOYEE shall comply with all
applicable policies of XM and Affiliates.
(c) During the term of employment, it shall not be a violation of this
Agreement for EMPLOYEE to (i) serve on no more than one outside corporate board
(except the board of a Conflicting Organization); (ii) serve as an officer or
director of a
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cooperative housing, or civic or charitable organization or committee; (iii)
deliver lectures, fulfill speaking engagements, or teach at educational
institutions; or (iv) manage personal passive investments, so long as such
activities (individually or collectively) do not conflict or materially
interfere with the performance of EMPLOYEE's duties hereunder.
2.4. INDEMNIFICATION. During and after the term of this Agreement, XM
shall provide EMPLOYEE with directors and officers insurance, and shall
indemnify EMPLOYEE and his legal representatives to the fullest extent permitted
by the laws of the State of Delaware and the By-Laws of XM as in effect on the
date hereof, against all damages, costs, expenses and other liabilities incurred
or sustained by EMPLOYEE or his legal representatives in connection with any
suit, action or proceeding to which EMPLOYEE or his legal representatives may be
made a party by reason of EMPLOYEE being or having been a director or officer of
XM or any Affiliate or having served in any other capacity or taken any other
action purportedly on behalf of or at the request of XM or any Affiliate. During
and after the term of this Agreement and without the need for further approval
by the Board of Directors of XM or any Affiliate, XM will promptly advance or
pay any and all amounts for costs or expenses (including but not limited to
legal fees and expenses incurred by counsel of EMPLOYEE's choice retained by
EMPLOYEE) for which EMPLOYEE may claim XM is obligated to indemnify him.
EMPLOYEE undertakes to repay such amounts if it is ultimately determined that he
is not entitled to be indemnified by XM as provided in this Article 2.4.
ARTICLE 3
COMPENSATION
3.1. BASE SALARY. For services rendered by EMPLOYEE pursuant to this
Agreement, XM agrees to pay EMPLOYEE a base salary ("Base Salary") for the first
Contract Year at the rate of Three Hundred Sixty Five Thousand Dollars
($365,000) per year. Such Base Salary shall be subject to review and increase at
least annually by the Board, and shall be increased to at least Four Hundred
Thousand Dollars ($400,000) for the second Contract Year and at least Four
Hundred Thirty Five Thousand Dollars ($435,000) for the third Contract Year. In
determining any increase above the minimums set forth in the preceding sentence,
the Board shall consider any increases in the cost of living and may provide for
performance or merit increases as it deems appropriate in its sole discretion.
Base Salary shall be payable in accordance with XM's then-prevailing executive
payroll practices. The term "Base Salary" as used herein shall include any
adjustments thereto made from time to time as permitted by this Article 3.1.
3.2. BONUSES.
(a) As an incentive for EMPLOYEE to enter into this Agreement, XM
agrees to pay EMPLOYEE, upon the execution of this Agreement, a signing bonus of
One Hundred Thousand Dollars ($100,000).
(b) With respect to each calendar year during the term of this
Agreement, regardless of XM's performance, EMPLOYEE shall be entitled to a bonus
(the
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"Leadership Bonus") equal to thirty percent (30%) of his Base Salary for the
calendar year if, in the reasonable judgment of the XM Board of Directors, he
shall have made the effort and provided the leadership expected of the CEO. In
any calendar year in which EMPLOYEE is employed by XM for less than the full
year, the Leadership Bonus will be paid on a pro-rata basis for the portion of
the calendar year for which EMPLOYEE was employed by XM and provided the
expected effort and leadership. The Leadership Bonus shall be paid within sixty
(60) days of the end of each calendar year.
(c) With respect to each calendar year during the term of this
Agreement, EMPLOYEE will be eligible to receive such bonuses (the "Discretionary
Bonus") as may be authorized and declared by the XM Board of Directors based
upon EMPLOYEE meeting or substantially exceeding performance criteria to be set
by the Board, after consultation with EMPLOYEE, at the start of each calendar
year. For 2001, such criteria shall be set by July 1, 2001. Although the actual
amount of any Discretionary Bonus will be determined by the Board, the "target"
amount of the annual Discretionary Bonus will be thirty to seventy percent
(30-70%) of EMPLOYEE's Base Salary for the calendar year, reflecting the Board's
determination that EMPLOYEE has met or substantially exceeded the established
performance criteria.
3.3. PARTICIPATION IN BENEFIT PLANS. Subject to applicable eligibility
requirements, and to the terms of this Agreement, EMPLOYEE shall be eligible
during the term of this Agreement to participate in any stock option, employee
stock ownership, pension, thrift, profit sharing, group life or disability
insurance, medical or dental coverage, education, or other retirement or
employee benefit plan or program that XM has adopted or may adopt for the
benefit of its employees, on the same basis as other executive employees.
EMPLOYEE shall be entitled to paid vacation, paid sick leave, and holidays on
the same basis as may from time to time apply to other XM executive employees
generally.
3.4. EXPENSES. XM shall reimburse EMPLOYEE for all reasonable, ordinary
and necessary business expenses actually incurred by EMPLOYEE in connection with
the performance of his duties hereunder, including ordinary and necessary
expenses incurred by EMPLOYEE in connection with travel on XM business. As Chief
Executive Officer of XM, EMPLOYEE shall be entitled to fly first class. All
expenses shall be approved in advance by XM in accordance with and subject to
the terms and conditions of XM's then-prevailing expense policy. As a condition
precedent to obtaining reimbursement of expenses, EMPLOYEE shall provide to XM
any and all statements, bills, or receipts evidencing the expenses for which
EMPLOYEE seeks reimbursement, and such related information or materials as XM
may from time to time reasonably require. EMPLOYEE shall account to XM for any
expenses that are eligible for reimbursement under this Section 3.4 in
accordance with XM policy.
3.5. EMPLOYMENT AND SUPPLIES. XM shall provide EMPLOYEE with
administrative support relating to the performance of EMPLOYEE's duties of the
same type and at least the same extent as is provided to other executive
employees. XM shall acquire and/or provide to EMPLOYEE for his business use: a
multimedia portable computer and subscriptions to various trade publications and
various trade books. Such
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items shall remain the exclusive property of XM, are to be used solely for XM's
benefit, and shall be returned promptly to XM upon request at the termination of
EMPLOYEE's employment for whatever reason.
3.6. WITHHOLDING. Anything in this Agreement to the contrary
notwithstanding, al payments required to be made by XM hereunder to EMPLOYEE or
EMPLOYEE's estate or beneficiaries in connection with EMPLOYEE's employment
hereunder shall be subject to the withholding of such amounts relating to taxes
as XM may reasonably determine it should withhold pursuant to any applicable law
or regulation.
3.7. STOCK OPTION GRANTS. EMPLOYEE shall receive options to purchase
Class A common stock of XM Satellite Radio Holdings Inc. ("XM Stock") on the
following terms.
(a) On the Effective Date, XM will grant EMPLOYEE an option to purchase
Three Hundred Thousand (300,000) shares of XM Stock. On the first anniversary of
the Effective Date, provided that EMPLOYEE is still employed by XM, XM will
grant EMPLOYEE an option to purchase One Hundred Fifty Thousand shares of XM
Stock. On the second anniversary of the Effective Date, provided that EMPLOYEE
is still employed by XM, XM will grant EMPLOYEE an option to purchase One
Hundred Fifty Thousand shares of XM Stock.
(b) The options granted pursuant to Article 3.7(a) hereof will be
non-qualified. The exercise price for such options shall be, with respect to
each grant, the closing price of XM Stock on the date of grant.
(c) Subject to the provisions of Article 4 hereof, the options granted
pursuant to Article 3.7(a) hereof will vest and become exercisable on the
following schedule: with respect to each grant, one third of the shares covered
by the option shall become exercisable on the first anniversary of the grant,
one third of the shares covered by the option shall become exercisable on the
second anniversary of the grant, and one third of the shares covered by the
option shall become exercisable on the third anniversary of the grant. In the
event that EMPLOYEE holds non-vested options at the time his employment by XM
terminates, such non-vested options shall vest or shall be forfeited, as the
case may be, in accordance with the provisions of Article 4 hereof.
(d) Vested options may be exercised within ten (10) years of the date
on which they were granted. In the event that EMPLOYEE holds unexercised vested
options at the time his employment by XM terminates, such vested options may be
exercised within the time periods set forth in Article 4 hereof.
(e) XM agrees that the XM Stock to be issued to EMPLOYEE upon his
exercise of the options granted pursuant to Article 3.7(a) hereof will be
registered for sale to the public on XM's Form S-8 Registration Statement.
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ARTICLE 4
TERMINATION
4.1. GENERAL. EMPLOYEE's employment hereunder shall terminate in
accordance with the provisions of this Article 4 upon EMPLOYEE's death or
Disability, upon EMPLOYEE's termination by XM with or without Cause, upon
EMPLOYEE's resignation with or without Good Reason, or upon the expiration of
the term of this Agreement without renewal.
4.2. DEATH. If the EMPLOYEE's employment terminates because of his
death, the date of termination shall be the date of death.
(a) If the EMPLOYEE's employment terminates because of his death, XM
shall continue to pay EMPLOYEE's then current Base Salary, pro-rated
Leadership Bonus, and pro-rated Discretionary Bonus (based on the percentage
of Base Salary awarded to EMPLOYEE as a Discretionary Bonus in the prior
year), and shall continue to make all applicable benefits available, to
EMPLOYEE's legal representatives, estate, beneficiaries or heirs, in
accordance with XM's then-prevailing executive payroll practices, through the
end of the third calendar month following EMPLOYEE's death. In addition, XM
shall continue any health, medical, dental, or similar benefits which members
of EMPLOYEE's family were receiving for a period of one year, or pay such
family members an amount equal to their cost for obtaining equivalent
coverage.
(b) If the EMPLOYEE's employment terminates because of his death,
EMPLOYEE's non-vested options shall be forfeited. EMPLOYEE's legal
representatives, estate, beneficiaries or heirs shall be entitled to exercise
any of EMPLOYEE's vested options within one (1) year after EMPLOYEE's death.
4.3. DISABILITY. For purposes of this Agreement, EMPLOYEE shall be
deemed to be under a Disability if EMPLOYEE shall be unable, by virtue of
illness or physical or mental incapacity or disability (from any cause or causes
whatsoever), to perform EMPLOYEE's essential job functions hereunder, whether
with or without reasonable accommodation, in substantially the manner and to the
extent required hereunder prior to the commencement of such disability, for a
period exceeding ninety (90) consecutive days.
(a) Upon EMPLOYEE's Disability, the payment of benefits under XM's
short-term and long-term disability insurance programs, if any, shall offset
XM's obligations under Article 3.1 hereof to the extent such benefits are
received by EMPLOYEE.
(b) Subject to any applicable legal requirements, in the event EMPLOYEE
shall remain under a Disability for a period exceeding one hundred twenty (120)
days in any twelve (12) month period, XM shall have the right to terminate
EMPLOYEE's employment hereunder. XM shall effect such termination by giving
EMPLOYEE a notice specifying the effective date of such termination, which date
shall not be earlier than the last day of the calendar month following the
giving of notice.
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(c) If XM terminates the EMPLOYEE's employment because of Disability,
XM shall continue to pay EMPLOYEE's then current Base Salary, pro-rated
Leadership Bonus, and pro-rated Discretionary Bonus (based on the percentage of
Base Salary awarded to EMPLOYEE as a Discretionary Bonus in the prior year), and
shall continue to make all applicable benefits available, to EMPLOYEE, in
accordance with XM's then-prevailing executive payroll practices, through the
end of the third calendar month following termination. In addition, XM shall
continue any health, medical, dental, or similar benefits which EMPLOYEE (and/or
members of EMPLOYEE's family) were receiving for a period of one year, or pay
EMPLOYEE an amount equal to the cost of obtaining equivalent coverage.
(d) If XM terminates EMPLOYEE's employment because of Disability,
EMPLOYEE's non-vested options shall be forfeited. EMPLOYEE shall be entitled to
exercise any of his vested options within one (1) year after termination.
4.4. TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION.
(a) For purposes of this Agreement, Cause shall mean: (i) EMPLOYEE's
willful or gross misconduct, willful or gross negligence in the performance of
his duties for XM, or intentional or habitual neglect of his duties for XM,
provided that XM shall have given EMPLOYEE notice specifying the conduct it
believes to fall within this sentence and EMPLOYEE shall have failed to remedy
such conduct within ten (10) days thereafter; or (ii) EMPLOYEE's theft or
misappropriation of funds of XM or conviction of a felony. XM shall effect a
termination for Cause by giving EMPLOYEE a notice specifying the effective date
of such termination.
(b) For purposes of this Agreement, voluntary resignation means the
EMPLOYEE's resignation of his employment hereunder without Good Reason (as
defined in Article 4.5(b) hereof. EMPLOYEE shall effect a termination by
voluntary resignation by giving XM a notice specifying the effective date of
such termination, which date shall not be earlier than thirty (30) days after
the giving of notice.
(c) In the event EMPLOYEE's employment is terminated by XM for Cause or
by EMPLOYEE by voluntary resignation:
(i) XM shall pay to EMPLOYEE, in accordance with XM's
then-prevailing executive payroll practices, all Base Compensation, benefits and
other payments to which EMPLOYEE was entitled hereunder through the effective
date of termination.
(ii) In the case of voluntary resignation only, EMPLOYEE shall
be entitled to exercise any of his vested options within three (3) months after
termination. Subject to the previous sentence of this Article 4.4(c)(ii),
EMPLOYEE's non-vested and vested but unexercised options shall be forfeited.
(iii) Except as set forth in this Article 4.4, XM shall have
no further obligation to EMPLOYEE (or EMPLOYEE's legal representatives, estate,
beneficiaries or heirs) for any compensation, benefits or other payments
hereunder, provided that
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nothing herein shall be deemed to affect EMPLOYEE's entitlement, if any, to any
vested pension or similar benefits to which he may be or may become entitled.
4.5. TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
(a) For the purposes of this Agreement, termination without Cause is
any termination by XM of EMPLOYEE's employment hereunder without Cause, as
defined in Article 4.4(a) hereof. XM shall effect a termination without Cause by
giving EMPLOYEE a notice specifying the effective date of such termination,
which date shall not be earlier than thirty (30) days after the giving of
notice.
(b) For the purposes of this Agreement, Good Reason shall mean: (i) a
substantial diminution of EMPLOYEE's responsibilities or status; (ii) XM's
relocation of EMPLOYEE outside the Washington, D.C. area; (iii) a material
breach of this Agreement by XM, provided that EMPLOYEE shall have given XM
notice of the conduct he believes to constitute the material breach and XM shall
have failed to remedy such breach within ten (10) days thereafter; (iv) the
departure of Gary M. Parsons as Chairman of the Board of Directors of XM, unless
the newly named Chairman is reasonably acceptable to EMPLOYEE; or (v) a Change
of Control of XM as defined in Article 4.5(c) hereof. EMPLOYEE shall effect a
termination by resignation for Good Reason by giving XM a notice specifying the
effective date of such termination.
(c) For the purposes of this Agreement, a Change of Control will occur
where (i) any person or group becomes beneficial owner of securities of XM
representing more than 40% of the then voting power of XM; (ii) Board members
(together with new members appointed by at least two thirds (2/3) of those
members) at the beginning of a two-year period no longer constitute two thirds
(2/3) of the Board during such two-year period; (iii) a merger/consolidation of
XM occurs wherein the XM voting securities immediately prior thereto do not
constitute at least sixty percent (60%) of the combined voting securities after
the merger/consolidation; or (iv) the stockholders approve a plan of complete
liquidation or winding-up or an agreement for the sale or disposition of all or
substantially all of XM's assets.
(d) In the event EMPLOYEE's employment is terminated by XM without
Cause or by EMPLOYEE by resignation for Good Reason:
(i) XM shall continue to pay EMPLOYEE's then current Base
Salary and pro-rated Leadership Bonus, and shall continue to make all applicable
benefits available to EMPLOYEE, in accordance with XM's then-prevailing
executive payroll practices, for two (2) years from such termination. With
respect to the health, medical, dental, or similar benefits which EMPLOYEE
(and/or members of EMPLOYEE's family) were receiving, XM may pay EMPLOYEE an
amount equal to his cost for obtaining equivalent coverage, as an alternative to
continuing such benefits.
(ii) XM shall pay EMPLOYEE's pro-rated Discretionary Bonus
(based on the percentage of Base Salary awarded to EMPLOYEE as a Discretionary
Bonus in the
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prior year), for the portion of the calendar year EMPLOYEE was employed by XM
prior to the termination.
(e) In the event EMPLOYEE's employment is terminated by XM without
Cause or by EMPLOYEE by resignation for Good Reason, all options that have been
granted to EMPLOYEE shall immediately vest and become exercisable, and EMPLOYEE
shall be entitled to exercise any of his vested options within eighteen (18)
months after termination.
(f) If, as a result of a Change of Control, it is determined that
EMPLOYEE would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code, XM shall reimburse EMPLOYEE for the amount of such tax,
and shall pay EMPLOYEE such additional amount as may be necessary to place
EMPLOYEE in the same financial position that he would have been in if he had not
incurred such excise tax liability. All determinations under this Article
4.5(f), including whether EMPLOYEE is liable for the excise tax, and the amount
to be paid to EMPLOYEE by XM, shall be made by a nationally-recognized
accounting firm to be selected by EMPLOYEE and paid by XM.
4.6. EXPIRATION OF CONTRACT TERM.
(a) For the purposes of this Agreement, Renewal Offer means a bona fide
offer by XM to enter into a new employment agreement with EMPLOYEE, on terms at
least as favorable to EMPLOYEE as this Agreement, made to EMPLOYEE at least four
(4) months before the expiration of this Agreement.
(b) In the event that XM makes a Renewal Offer to Employee, but the
parties nevertheless do not enter into a new employment agreement and EMPLOYEE's
employment by XM therefore terminates upon the expiration of this Agreement, any
options scheduled to vest on the third anniversary of the Effective Date of this
Agreement pursuant to Article 3.7(c) shall immediately vest and become
exercisable, all other non-vested options shall be forfeited, and EMPLOYEE shall
be entitled to exercise any of his vested options within three (3) months after
termination.
(c) In the event that XM does not make a Renewal Offer to Employee and
EMPLOYEE's employment by XM therefore terminates at the expiration of the term
of this Agreement, all options that have been granted to EMPLOYEE shall
immediately vest and become exercisable, and EMPLOYEE shall be entitled to
exercise any of his vested options within eighteen (18) months after
termination.
ARTICLE 5
RESTRICTIVE COVENANTS
5.1. CONFIDENTIALITY. Except as authorized or directed by XM, EMPLOYEE
shall not, at any time during or subsequent to the term of this Agreement,
directly or indirectly publish or disclose any Confidential Information of XM or
of any of its Affiliates, or Confidential Information of others that has come
into the possession of XM or of any of its Affiliates, or into the EMPLOYEE's
possession in the course of his
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employment with XM or of his services and duties hereunder, to any other person
or entity, and EMPLOYEE shall not use any such Confidential Information for
EMPLOYEE's own personal use or advantage or make it available to others for use.
All Confidential Information, whether oral or written, regarding the business or
affairs of XM or any of its Affiliates, including, without limitation,
information as to their products, services, systems, designs, inventions,
software, finances (including prices, costs and revenues), marketing plans,
programs, methods of operation, prospective and existing contracts, customers
and other business arrangements or business plans, procedures, and strategies,
shall all be deemed Confidential Information, except to the extent the same
shall have been lawfully and without breach of the EMPLOYEE'S confidentiality
obligation made available to the general public without restriction, or that
EMPLOYEE can prove, by documentary evidence, was previously known to EMPLOYEE
prior to the term of EMPLOYEE's employment. The Company shall be under no
obligation to identify specifically any information as to which the protection
of this Section 5.1 extends by any notice or other action. Upon expiration or
termination of this Agreement for any reason, EMPLOYEE shall promptly return to
XM all Confidential Information, including all copies thereof in EMPLOYEE's
possession, whether prepared by him or others.
5.2. UNFAIR COMPETITION. During his employment pursuant to this
Agreement and for a period of one (1) year after the termination of his
employment, EMPLOYEE shall not, within the United States, directly or
indirectly, and whether or not for compensation, as a stockholder owning
beneficially or of record more than five percent (5%) of the outstanding shares
of any class of stock of an issuer, or as an officer, director, employee,
consultant, partner, joint venturer, proprietor, or otherwise, engage in or
become interested in any Conflicting Organization in connection with research,
development, consulting, manufacturing, purchasing, accounting, engineering,
marketing, merchandising or selling of any Conflicting Product or Service,
directly or indirectly, in competition with XM or any of its Affiliates (or any
of their successors) as conducted from time to time during such period. During
the period in which EMPLOYEE is receiving any payments under this Agreement and
for a period of one (1) year thereafter, EMPLOYEE shall not, without the prior
written consent of XM, solicit or hire or induce the termination of employment
of any employees or other personnel providing services to XM, or any of its
Affiliates, for any business activity, other than a business activity owned or
controlled, directly or indirectly, by XM or any of its Affiliates.
5.3. INJUNCTIVE RELIEF.
(a) EMPLOYEE acknowledges and warrants that he will be fully able to
earn an adequate livelihood for himself and his dependents if Section 5.2 should
be specifically enforced against him, and that Section 5.2 merely prevents
unfair competition against XM for a limited period of time. EMPLOYEE agrees and
acknowledges that, by virtue of EMPLOYEE's employment with XM, EMPLOYEE shall
have access to and maintain an intimate knowledge of XM's activities and
affairs, including trade secrets, Confidential Information, and other
confidential matters. As a result of such access and knowledge, and because of
the special, unique, and extraordinary services that EMPLOYEE is capable of
performing for XM or one of its
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competitors, EMPLOYEE acknowledges that the services to be rendered by EMPLOYEE
pursuant to this Agreement are of a character giving them a peculiar value, the
loss of which cannot adequately or reasonably be compensated by money damages.
Consequently, EMPLOYEE agrees that any breach or threatened breach by EMPLOYEE
of EMPLOYEE's obligations under this Article 5 would cause irreparable injury to
XM, and that XM shall be entitled to (i) preliminary and permanent injunctions
enjoining EMPLOYEE from violating such provisions, and (ii) actual money damages
suffered by XM as a result of such breach, in the amount of any fees,
compensation, benefits, profits, or other remuneration earned by EMPLOYEE as a
result of such breach, together with interest, and cost and attorney's fees
expended to collect such damages or secure such injunctions. Nothing in this
Agreement, however, shall be construed to prohibit XM from pursuing any other
remedy, XM and EMPLOYEE having agreed that all such remedies shall be
cumulative.
(b) The restrictions set forth in this Article 5 and the following
Article 6 shall be construed as independent covenants, and shall survive the
termination or expiration of this Agreement, and the existence of any claim or
cause of action against XM, whether predicated upon this Agreement or otherwise,
shall not constitute a defense to the enforcement by XM of the restrictions
contained in this Article 5 or the following Article 6. EMPLOYEE hereby consents
and waives any objection to the jurisdiction over his person or the venue of any
courts within the State of Virginia with respect to any proceedings in law or in
equity arising out of this Article 5 or the following Article 6. If any court of
competent jurisdiction shall hold that any of the restrictions contained in
Section 5.2 are unreasonable as to time, geographical area, or otherwise, said
restrictions shall be deemed to be reduced to the extent necessary in the
opinion of such court to make their application reasonable.
ARTICLE 6
INVENTIONS, WORKS OF AUTHORSHIP,
PATENTS AND COPYRIGHTS
6.1. OWNERSHIP OF INVENTIONS AND WORKS OF AUTHORSHIP. EMPLOYEE agrees
that all Inventions made, conceived, discovered, developed or reduced to
practice by EMPLOYEE and all software and other works of authorship created by
EMPLOYEE, either alone or with others, at any time, within or without normal
working hours, during the term of this Agreement, arising out of such employment
or based upon Confidential Information, or pertinent to any field of business or
research in which, during such employment, XM is engaged or (if such is known or
ascertainable by EMPLOYEE) is considering engaging, whether or not patented or
patentable, shall be and remain the sole property of XM with respect to all
rights of EMPLOYEE arising from any discovery, conception, development,
reduction to practice, or creation by EMPLOYEE. XM shall have the full right to
assign, license, or transfer all rights thereto.
6.2. DISCLOSURE OF INVENTIONS AND WORKS OF AUTHORSHIP. EMPLOYEE shall
promptly make full disclosure to XM or to an authorized representative thereof
of all information relating to the making, conception, discovery, development,
creation or
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reduction to practice of Inventions, or of software and other works of
authorship owned by XM pursuant to Section 6.1 above.
6.3. PATENT AND COPYRIGHT APPLICATIONS. At the request of XM and at
XM's expense, EMPLOYEE shall execute such documents and perform such acts as XM
deems necessary to obtain patents or the like on such Inventions or copyright
registrations for such software and other works of authorship in any
jurisdiction or jurisdictions. Such obligation shall continue beyond the term of
this Agreement. In the event that XM is unable because of EMPLOYEE's mental or
physical capacity or for any other reason to secure EMPLOYEE's signature to
apply for or to pursue any applications for patent or copyright covering
Inventions, software and other works of authorship owned by XM pursuant to
Section 6.1, then EMPLOYEE hereby irrevocably designates and appoints XM as
EMPLOYEE's agent and attorney in fact, upon prior notice, to act for and in his
behalf and stead to execute and file any such applications and to do all other
lawfully permitted acts to further the prosecution and issuance of patents and
copyright registrations thereon with the same legal force and effect as if
executed by EMPLOYEE. EMPLOYEE further agrees not to file any patent
applications relating to or describing or otherwise disclosing any Confidential
Information or any such Inventions, or to claim any copyright or file any
applications to register any copyright in such software or other works of
authorship, except with the prior written consent of XM.
6.4. ASSIGNMENT OF INVENTIONS AND WORKS OF AUTHORSHIP. EMPLOYEE agrees
to assign to XM or it Affiliates all of EMPLOYEE's right, title and interest in
and to any and all such Inventions and the patent applications and patents
relating thereto and to the copyright in any and all such software and other
works of authorship and any copyright applications and registrations relating
thereto conceived, reduced to practice, discovered, created or otherwise
developed by EMPLOYEE and owned by XM pursuant to Section 6.1 above.
ARTICLE 7
MISCELLANEOUS
7.1. ASSIGNMENT. The rights and obligations of XM under this Agreement
shall be binding upon its successors and assigns and, subject to EMPLOYEE's
rights under Article 4.5 hereof, may be assigned by XM to the successors in
interest of XM. The rights and obligations of EMPLOYEE under this Agreement
shall be binding upon EMPLOYEE's heirs, legatees, personal representatives,
executors or administrators. This Agreement may not be assigned by EMPLOYEE, but
any amount owed EMPLOYEE upon EMPLOYEE's death shall inure to the benefit of
EMPLOYEE's heirs legatees, personal representatives, executors, or
administrators.
7.2. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered, sent by overnight courier,
or mailed by first-class, registered, or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram, telecopy, or telex
addressed as follows:
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If to EMPLOYEE: (Copy to XM Executive Office)
Hugh Panero
4609 Derussey Parkway
Chevy Chase, Maryland 20815
If to XM:
XM Satellite Radio Holdings Inc.
1500 Eckington Place, N.E.,
Washington, D.C. 20002
Telephone: 703-758-6116
Telecopy: 703-758-6106
Attn: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7.3. ENTIRE AGREEMENT. From and after the Effective Date, this
Agreement constitutes the entire agreement between the parties hereto, and
expressly supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein.
7.4. HEADINGS. Article and Section headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
7.5. SEVERABILITY. In the event any provision of this Agreement, or any
portion thereof, is determined by any arbitrator or court of competent
jurisdiction to be unenforceable as written, such provision or portion thereof
shall be interpreted so as to be enforceable. In the event any provision of this
Agreement, or any portion thereof is determined by any arbitrator or court of
competent jurisdiction to be void, the remaining portions of this Agreement
shall nevertheless be binding upon XM and EMPLOYEE with the same effect as
though the void provision or portion thereof had been severed and deleted.
7.6. ARBITRATION. Without prejudice to XM's right to seek an injunction
pursuant to Article 5.3(a) hereof from a court of competent jurisdiction, any
dispute between the parties hereto arising out of this Agreement, or otherwise
arising out of or relating to EMPLOYEE's employment by XM, or the termination
thereof, shall be submitted to non-binding mediation before a mediator to be
agreed upon by the parties or, failing agreement, to be appointed by the
American Arbitration Association ("AAA"). In the event that mediation is
unsuccessful, such dispute shall be resolved by binding arbitration, before a
single arbitrator, under the rules of the AAA. The arbitrator shall
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have the authority to apportion the costs of arbitration, and to render an award
including reasonable attorney's fees, as and to the extent he deems appropriate
under the circumstances.
7.7. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the substantive laws of the State of
Virginia (excluding the choice of law rules thereof).
7.8. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or
waiver of the terms of this Agreement shall be valid unless made in writing and
duly executed by EMPLOYEE and XM. No delay or failure at any time on the part of
EMPLOYEE or XM in exercising any right, power or privilege under this Agreement,
or in enforcing any provision of this Agreement, shall impair any such right,
power, or privilege, or be construed as a waiver of any default or as any
acquiescence therein, or shall affect the right of EMPLOYEE or XM thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
7.9. ADDITIONAL OBLIGATIONS. Both during and after the term of
employment, EMPLOYEE shall, upon reasonable notice, furnish XM with such
information as may be in EMPLOYEE's possession or control, and cooperate with
XM, as may reasonably be requested by XM (and, after the term of employment,
with due consideration for EMPLOYEE's obligations with respect to any new
employment or business activity) in connection with any litigation or other
adversarial proceedings in which XM or any Affiliate is or may become a party.
XM shall reimburse EMPLOYEE for all reasonable expenses incurred by EMPLOYEE in
fulfilling EMPLOYEE's obligations under this Article 7.9.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
XM Satellite Radio Holdings, Inc.
XM Satellite Radio Inc.
By
-------------------------------------
Gary M. Parsons
Chairman of the Board
Date: _____________
-------------------------------------
Hugh Panero
Date: _____________
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